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Taxes in America

Surely there has to be a better, more frictionless way to pay

There are two types of Americans: those who pay their taxes at the beginning of the year, and those who would prefer to not think about it anymore, thank you very much. (Can you guess which category I fall into?) This year, April 18th was the last day in the U.S. to file (or request an extension for) one’s prior-year taxes, so it is predictably one of the most stressful times of the year for many Americans.

For some, this stress comes simply as a result of needing to pay out an extremely large sum of money to the government. For the rest of us, the entire process is hectic from start to finish, a comprehensive, confusing and unnecessarily bureaucratic approach to summarizing your last 365 days as they pertain to finances.

Gathering your requisite employment and financial paperwork in order is only the beginning. If you’ve moved, changed jobs, changed states, married, divorced, donated to charity, withdrew from retirement funds, inherited any sum, you name it—there’s a form for it, and good luck if you can understand the fine print.

While there are a number of filing apps available online, in my opinion they’re not always the most reliable services, especially if you happen to put your eggs in a lot of different financial baskets. Many of us throw our hands in the air and opt to let someone else—a tax specialist trained in bureaucratic calculus and 8-point fonts—handle the mess for us instead.

While it’s easy to complain about the widespread pain of tax season, when you look at the numbers, it becomes clear that taxes are actually an enormous source of friction for the entire nation, and not just in an emotional sense. Collectively, we spend over 6 billion hours just preparing our taxes, with over $10 billion spent on tax specialists and $2 billion on software that still requires hours of our time. Once the IRS processes our returns, millions of us will invest even more time correcting our errors.

Surely there has to be a better, more frictionless way to pay what ultimately comes down to a complicated bar tab to the government. And there is—there are many ways, in fact—but our leaders simply haven’t embraced any yet.

Can you imagine the IRS saying something like “We can’t make paying taxes pleasant, but at least we can make it simple”? That’s the slogan of the tax authority in the Netherlands, where 15 minutes is a reasonable amount of time to allocate for one’s tax forms. Or, can you imagine receiving a single postcard that details your income and amount owed, with a simple Agree/Disagree option as a response? The citizens of Japan need only reply to this government correspondence once per year.

These countries use automated systems to fill out their citizens’ tax forms, sparing them countless hours of labor, billions of dollars and who knows how much unnecessary strife. Not surprisingly, these are mostly paperless systems, which we’ve seen time and time again make for a frictionless payment system that is seriously scalable.

What’s the tax system in your country—is it full of friction, or is it a smooth series of exchanges and practically painless? We’re curious to know.